June: Best and Worst Asset Classes of 2008
Jun/15/08 03:56 PM Filed in: Diversify
Risk
What asset classes are
winning in 2008 as of
Tuesday, June 10?
1) +33.24% - Commodities (GSG)
2) +11.89% - Natural Resources (IGE)
2) +3.10% - Domestic Real Estate Investment Trusts (RWR)
What asset classes are losing in 2008 as of Tuesday, June 10?
1) -10.97% International Real Estate (RWX)
2) -10.64% International Listed Private Equity (PFP)
3) -9.31% Domestic Listed Private Equity (PSP)
How are the broad markets as of Tuesday, June 10?
Domestic Stocks (SPY): -7.00%
Domestic Bonds (AGG): -1.22%
International Stocks (EFA): -7.01%
International Bonds (BWX): +0.82%
Emerging Market Stocks (EEM): -6.17%
Emerging Market Bonds (PCY): -0.32%
Our Comments: In the last 30 days we have seen the return of volatility to the markets. Oddly enough, there has been strength from micro cap (FDM). Since our last email it's only down -0.24% and considering the S&P 500 (SPY) has fallen -4.62% during this same period, that's quite remarkable. Historically micro cap and small cap has led us out of recessions, so if we are in a recession those are the asset classes that may signal a recovery.
If you go back 10 years (June 6th 1998) and take a look at the S&P 500 (SPY), the market appreciation is only 24%. That's an average annual return of 1.89% over that 10 year period. With S&P 500 having a long term annualized return of 10% to 12%, we've got a significant deviation from the mean return. So what does this mean? We feel that US stocks are due for a rally in the next few years.
Just as the emerging markets quietly started their charge towards the tail-end of the dot com boom, we feel that towards the tail-end of this commodity boom US stocks will start their next upward move. In the last week, almost every asset class has gotten killed. However, there has been surprising relative strength from the S&P 500, which is a rare occurrence. We'll be watching for a consistent trend change.
What do we do with this information? For one, we don't try to anticipate what's going to happen in the short run. Our firm studies very long-term trends and tries to build portfolios that do well through them all. Currently, our average University Endowment Styled Portfolio is up in 2008 (0.84% after fees). Our portfolios are generally globally diversified so we just need one of the markets to improve for performance to kick up. We are constantly researching how to make our portfolios more stable without sacrificing return. Our historical research is designed to help us understand how to make those improvements.
Important Disclosure
1) +33.24% - Commodities (GSG)
2) +11.89% - Natural Resources (IGE)
2) +3.10% - Domestic Real Estate Investment Trusts (RWR)
What asset classes are losing in 2008 as of Tuesday, June 10?
1) -10.97% International Real Estate (RWX)
2) -10.64% International Listed Private Equity (PFP)
3) -9.31% Domestic Listed Private Equity (PSP)
How are the broad markets as of Tuesday, June 10?
Domestic Stocks (SPY): -7.00%
Domestic Bonds (AGG): -1.22%
International Stocks (EFA): -7.01%
International Bonds (BWX): +0.82%
Emerging Market Stocks (EEM): -6.17%
Emerging Market Bonds (PCY): -0.32%
Our Comments: In the last 30 days we have seen the return of volatility to the markets. Oddly enough, there has been strength from micro cap (FDM). Since our last email it's only down -0.24% and considering the S&P 500 (SPY) has fallen -4.62% during this same period, that's quite remarkable. Historically micro cap and small cap has led us out of recessions, so if we are in a recession those are the asset classes that may signal a recovery.
If you go back 10 years (June 6th 1998) and take a look at the S&P 500 (SPY), the market appreciation is only 24%. That's an average annual return of 1.89% over that 10 year period. With S&P 500 having a long term annualized return of 10% to 12%, we've got a significant deviation from the mean return. So what does this mean? We feel that US stocks are due for a rally in the next few years.
Just as the emerging markets quietly started their charge towards the tail-end of the dot com boom, we feel that towards the tail-end of this commodity boom US stocks will start their next upward move. In the last week, almost every asset class has gotten killed. However, there has been surprising relative strength from the S&P 500, which is a rare occurrence. We'll be watching for a consistent trend change.
What do we do with this information? For one, we don't try to anticipate what's going to happen in the short run. Our firm studies very long-term trends and tries to build portfolios that do well through them all. Currently, our average University Endowment Styled Portfolio is up in 2008 (0.84% after fees). Our portfolios are generally globally diversified so we just need one of the markets to improve for performance to kick up. We are constantly researching how to make our portfolios more stable without sacrificing return. Our historical research is designed to help us understand how to make those improvements.
Important Disclosure